What the US Gets Wrong About Chinese Cyberespionage

On May 18 2015, as the United States government again alleged Chinese government sponsorship of a major case of commercial espionage, an American researcher, Jon R. Lindsay, asserted in a Policy Brief and associated article in The Huffington Post, that the thrust of the associated political campaign by Washington was exaggerated. He had made similar claims in an article in International Security several months earlier. I can only support his conclusions. His work with colleagues on the recent book, China and Cybersecurity(2015)and my work for a slightly earlier book, Cyber Policy in China (2014), provide strong analytical foundations for such a conclusion.

In May 2014, the United States took an unprecedented step in the diplomacy of espionage by indicting five Chinese military personal operating inside China for trade secret theft by hacking, and claimed their actions to be part of a bigger Chinese official campaign to pass such trade secrets to its civil sector firms. A review by me of the public domain information released by the U.S. government on the case of the five PLA personnel suggests that while they may have in fact stolen commercial secrets, the available public domain evidence does not bear out the claim that such information is being regularly passed to Chines civil sector firms as part of a government policy or that it is happening on such as scale as to cripple the competitiveness of US firms. This 10,000 word review is available here as a discussion paper (see: “China’s Cyberespionage: The National Security Distinction and U.S. Diplomacy“). I have also looked at this question from the point of view of China’s intelligence priorities in a shorter website commentary available here.

Lindsay wrote in his policy brief for Harvard’s Belfer Center as follows: “There is strong evidence that China continues to engage in aggressive cyber espionage campaigns against Western interests. Yet it struggles to convert even legitimately obtained foreign data into competitive advantage, let alone make sense of petabytes of stolen data.”

Like Lindsay, I share the view that the campaign by the United States is damaging to its diplomatic interests and unnecessarily undermines otherwise credible and effective efforts by its diplomats and private actors to foster cooperative relations on issues of cyberspace governance. The potential for such cooperation was canvassed in a paper released by the EastWest Institute in 2012, “Cyber Detente between the United States and China”, and translated into Chinese by a military university for briefing of members of China’s Central Military Commission. This paper built in part on several years of Track 2 diplomacy by the EastWest Institute between the United States and China on cyber issues.

Developments since then have been both positive and negative. On the positive side, one can point to the convening of an official joint working group on cyber security in mid-2013, while noting that its operations were scuttled within a year of its establishment by the indictment of the five PLA personnel in May 2014.

There are many ways to characterize the negative impact on potential bilateral cooperation on cyberspace issues of the “lawfare” being practised by the United States to discipline China for its massive cyber intrusions into the commercial secrets of U.S. firms. One downside is in my view more important than others. This is the belief being fostered by U.S. officials among elites in the United States and in other countries that China as a nation is a “cheater” country. This belief arises from the sustained repetition by U.S. administration officials, all the way to the President, of unsubstantiated allegations about the economic impact of China cyber espionage. I do not believe President Obama has been wrong on as many things as his critics suggest, but I believe he is wrong on this one.

In the absence of any Administration taxonomy of the economic impacts of cyber espionage, alleged by some to represent the largest illicit transfer of wealth in human history, one way of evaluating it is to understand that for more than three decades it has been U.S. policy, like that of its principal allies, to undertake the largest lawful transfer of wealth in human history through trade with, investment in and technology transfer to China. This is especially applicable in the cyber and industrial domains. China secures so much through lawful technology transfer, than it does through espionage, and that process is far more productive for most civil use technologies than illicit routes. Dual-use and military technologies are a different case. There the cost-benefit calculation is influenced by the type of export controls imposed by the United States.

Is China a cheater nation when it comes to intellectual property? It clearly is not. It is however a country in which rule of law is only painstakingly being established, in which corruption is rampant, reaching to the highest political offices in the country, and in which impunity for commercial espionage and intellectual property theft has been quite prevalent.

But seriously, should the United States base its diplomacy toward China on such a stereotype “profiling” of an entire country? The United States government has directly called President Putin a liar for his denial of direct Russian involvement in the armed insurrection in Ukraine, but it does not call Russia a “liar country”. Why does the U.S. Administration, including the President, feel so justified in fostering the line that China is a cheater country in civil economic sectors because of the economic espionage crimes of a small number of its officials or Chinese citizens acting for personal gain?

Economic espionage is not unique to China. Like many other governments, including the United States, China almost certainly does encourage the transfer of other countries’ trade secrets in military and certain dual-use technologies to its civil sector firms. Chines actors may be particularly adept in certain stages of economic espionage, but it is almost certainly not Chinese government policy to allow the transfer of trade secrets collected by highly classified intelligence sources to its civil sector firms for non-military technologies on a wide-spread basis. A U.S. influencing strategy toward China premised on the claim that this is China’s policy would appear to be ill-advised based on the evidence introduced so far by the United States in the public domain.